Latest / Bloomberg Intelligence / USG CEO Metcalf on Innovation of Bubbles in Wallboard (Audio)

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USG CEO Metcalf on Innovation of Bubbles in Wallboard (Audio) · Bloomberg Intelligence

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  Speaker 1: I'm Charlie Pellett, and that's a Bloomberg business flash. You're
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  Speaker 1: listening to taking stock with Kathleen's and pim Flos on
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  Speaker 1: day conference springing together a variety of executives select group
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  Speaker 1: actually of high growth companies as they get to hear
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  Speaker 1: directly from chief executives of companies that have really made it,
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  Speaker 1: that have made some kind of major transformation. And so
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  Speaker 1: here's a little quiz. All right, the stock of the
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  Speaker 1: company of the chief executive we're going to talk to
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  Speaker 1: the stock of the company is of twenty so far
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  Speaker 1: this year. They're based in Chicago. And everyone listening, Kathleen,
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  Speaker 1: everyone listening has been in close proximity to this company's
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  Speaker 1: product today, probably and certainly for their lives. Who do
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  Speaker 1: you think it is? Well, go ahead, you can tell it.
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  Speaker 1: Scalfe's chairman, president, CEO of us G Corporation. And there
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  Speaker 1: are a construction materials manufacturer that basically Jim helped turn
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  Speaker 1: the putting around with a new kind of wall board.
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  Speaker 1: I love this story, you know, I think you and
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  Speaker 1: Jim no, Jim metcalf thanks very much for for being here.
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  Speaker 1: Much appreciated. Um do we do you justice? I mean,
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  Speaker 1: have we kind of wonder for us story a little
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  Speaker 1: bit here. Well, we don't have enough time for the
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  Speaker 1: entire year. All right, Well, I will say, you know,
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  Speaker 1: everyone knows our product rock rock. So there's one of
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  Speaker 1: our one of our brand that uh we been. So
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  Speaker 1: we're going to take a little closer look at that
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  Speaker 1: kind of thing. You know. It' funny. Can I remember
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  Speaker 1: as a kid, al when I got to think of
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  Speaker 1: sheet rock wall board, I could think of my uh
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  Speaker 1: dad who was the home handyman putting it up, cutting it.
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  Speaker 1: I just I could just and you know that it's
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  Speaker 1: kind of gotten. Was a sper at one point. I
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  Speaker 1: remember the smell. He was a good customer. He started
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  Speaker 1: way back in the day when I started with us.
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  Speaker 1: She but you know, we're more than just sheet rock.
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  Speaker 1: We're building products. And I like to say what we
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  Speaker 1: do is we build shelter. It's where you live, it's
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  Speaker 1: where you were. Can you play like you said, everyone's
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  Speaker 1: everyone's around it and U uh more than just walboard,
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  Speaker 1: we make ceiling tile, we make steel. We really build shelter.
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  Speaker 1: Uh for for the environment. You started at us G
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  Speaker 1: as a trainee. When was that? And what was yes?
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  Speaker 1: Started thirty five years ago? Uh right out of school.
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  Speaker 1: I grew up in Ohio and western Pennsylvania area and
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  Speaker 1: and drove out west and US Gypsum Company was kind
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  Speaker 1: enough to offer me a job in the middle of
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  Speaker 1: a recession and started out. What's great about that, I'd
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  Speaker 1: like to tell young employees that you can start out
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  Speaker 1: at the ground floor and be a trainee and work
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  Speaker 1: your way all the way up to be and be
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  Speaker 1: honored to be the CEO of a wonder of a
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  Speaker 1: wonderful company. Tell us a little bit about the technology
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  Speaker 1: that you're employing. Because you're making board, you know, you're
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  Speaker 1: making the stuff lighter, lighter, easier to use, and you're
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  Speaker 1: making it more vironmentally friendly. Doesn't necessarily come to top
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  Speaker 1: of mind, but actually it's that's why it's so difficult
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  Speaker 1: to do it. We we really we reinvented a product
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  Speaker 1: that's actually today and this year is a hundred years old.
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  Speaker 1: So walboard was invented sheet rock. Walboard was invented a
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  Speaker 1: hundred years ago, and it was a replacement for plaster.
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  Speaker 1: And you think there's still buildings with plaster in and
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  Speaker 1: it was it was a new invention. So we really
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  Speaker 1: re revitalized the line because it was heavy. It was
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  Speaker 1: hard to cut um. It was not. We used too
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  Speaker 1: much energy. We drive off the water. So we made
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  Speaker 1: it thirty lighter, made it stronger, and also we're using
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  Speaker 1: less water. One of our strategies is used fifty less
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  Speaker 1: water and all of our manufacturing to really reduce the
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  Speaker 1: carbon footprint of of construction. But you know, there's to
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  Speaker 1: me that is that's such a dramatic and in human
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  Speaker 1: element of this story because when the housing market collapsed
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  Speaker 1: in two thousand and eight, that hit us g really
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  Speaker 1: hard because all that's that that gypsum walbarb were gonna
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  Speaker 1: call that you were selling all those building materials. Suddenly
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  Speaker 1: demand just you lost of your demand. So you got
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  Speaker 1: your people together, you had to downsize. You figured you
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  Speaker 1: could make this new product. You guys, your your team's
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  Speaker 1: told you about three years. He said, no, I've got
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  Speaker 1: to do it in a year, right, right, Well, you
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  Speaker 1: know we didn't have a lot of time because it
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  Speaker 1: was in two thousand and eight. I'm sure every want
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  Speaker 1: to remember it was a perfect storm in the financial
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  Speaker 1: you know arena, but also it had a ripple effect
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  Speaker 1: in all of our markets. You know, housing was one thing,
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  Speaker 1: but we sell in the commercial buildings that was down
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  Speaker 1: even more than housing, and then repairing the model. The
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  Speaker 1: home depots quit building stores, which he had never done.
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  Speaker 1: They're always building stores. So each one of our markets,
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  Speaker 1: really I called it, you know, it was a tsunami.
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  Speaker 1: And we were not in a recession. We were I
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  Speaker 1: called a small d depression, and we had to create
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  Speaker 1: our own recovery. Waiting for housing to come back, waiting
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  Speaker 1: for the market to come back. We just didn't have
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  Speaker 1: the time to do that. Our balance sheet was under
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  Speaker 1: stress and we needed to change the rules. So we
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  Speaker 1: put together our strategy, which I called the Plan to Win.
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  Speaker 1: We wanted to strengthen our core businesses, which has made
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  Speaker 1: manufacturing and distribution in North America. We wanted to diversify
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  Speaker 1: our earnings, so we had to get out of some markets.
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  Speaker 1: We got out of Europe, and I used the term
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  Speaker 1: we weeded and feeded. We weeded some areas where you
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  Speaker 1: can't win. And the definition that you heard it before,
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  Speaker 1: you need to be number one or number two in
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  Speaker 1: the market, and we were not that strong in Europe.
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  Speaker 1: So we took those funds and reinvested in Asia and
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  Speaker 1: Austro Asia. That helped us diverse fire earnings to a
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  Speaker 1: joint venture which has been very, very successful called us
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  Speaker 1: D Borrel. But the third element, which is the most
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  Speaker 1: important element of getting everyone together kind of things you asked,
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  Speaker 1: was we needed to differentiate to innovation. And that's where
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  Speaker 1: I got our best minds together and said, what is
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  Speaker 1: the one thing that we're working on that we can
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  Speaker 1: rally the troops. And it was called ultra light and
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  Speaker 1: this is taking less weight at taking weight out, keeping
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  Speaker 1: it stronger. It doesn't sag, it performs and from a
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  Speaker 1: productivity standpoint, to our contractors that were under stress, it
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  Speaker 1: gave them an advantage in this recession because we weren't
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  Speaker 1: the only ones that were suffering the contractors, the distributors.
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  Speaker 1: Distributors didn't have to buy as much equipment, so it
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  Speaker 1: had a big trickle down through the entire network. But
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  Speaker 1: we couldn't do We didn't have three years to wait,
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  Speaker 1: so focus. I focused the organization. We've had all hands
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  Speaker 1: on deck. We quit doing some things, we stopped doing
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  Speaker 1: other projects, and I was personally involved in the rollout
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  Speaker 1: of this. If there was an obstacle, I want to
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  Speaker 1: know who was on it. I'd like to use the
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  Speaker 1: term one neck to choke, So who was involved with
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  Speaker 1: that and what do they need to do and how
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  Speaker 1: can we shorten that? And what we found was the
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  Speaker 1: corporate immune system made it three years. When when I
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  Speaker 1: gave everyone the open plane field to say you can
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  Speaker 1: do You're so good, you can do this in the
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  Speaker 1: less time. It gave them really the energy to say
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  Speaker 1: why not. And for me, being the new CEO, I
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  Speaker 1: needed a morale booster because we're letting people off. We
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  Speaker 1: were closing down factories. That's not fun. I hate that.
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  Speaker 1: So I needed something as a leader. And you know,
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  Speaker 1: it wasn't a hail Mary. But we weren't sure it
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  Speaker 1: was gonna work because, as you say, Pim, it's very
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  Speaker 1: it's counterintuitive. You're taking mass out of a product. It's
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  Speaker 1: just as strong, it's lighter. And we were We have
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  Speaker 1: these wonderful scientists that came up with this invention. I mean,
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  Speaker 1: it's really all about the bubbles, you know, the bubbles
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  Speaker 1: in stucco. It's all about goes, how does this work?
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  Speaker 1: What does We can't tell you. I like to say
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  Speaker 1: we put like magic pixie dust in it, but it
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  Speaker 1: makes the bubbles stronger. So when you say how they
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  Speaker 1: get lighter, it's all about the bubbles. I gotta ask
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  Speaker 1: you about age, not yours, not mine, but the buildings
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  Speaker 1: in the United States, particularly residential and commercial, tell us
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  Speaker 1: about that. That implies they're getting older like we are. Okay,
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  Speaker 1: we're making them better because we can remodel those and
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  Speaker 1: that falls half of our business is repairing remodel. So
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  Speaker 1: the commercial buildings that we're looking around at the beautiful
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  Speaker 1: city here are the average ages forty forty years old.
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  Speaker 1: So you know you have to you know, there aren't
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  Speaker 1: environmentally sensitive you know, the the attendants want uh different lighting,
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  Speaker 1: you know, heat, I mean, everything's changed. So we come
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  Speaker 1: in and we remodel a lot of these buildings. Housing. Uh,
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  Speaker 1: the average house is forty plus years old. So that's
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  Speaker 1: why we've really focused on repairing RAM model because our
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  Speaker 1: products are a fairly inexpensive repairing m model in your home,
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  Speaker 1: build a new home, get your kids out of the basement,
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  Speaker 1: you know, hopefully they go get a job. So it's
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  Speaker 1: a really important So we look at that that overall
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  Speaker 1: demographics of you know, the demand of of our products.
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  Speaker 1: So isn't that with driving your business. A lot of
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  Speaker 1: concern about the economy is still the companies haven't been investing.
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  Speaker 1: FED might raise interest rates because they want to get
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  Speaker 1: off the dime. As a CEO of a company that
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  Speaker 1: seems like it's doing very well, how does that How
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  Speaker 1: does this all feel to you? You know when people
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  Speaker 1: ask me about the ec on me, I say, it
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  Speaker 1: depends where you are in the economy. If you're an
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  Speaker 1: oil and gas, you're in the railroads business. I think
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  Speaker 1: they're in a different spot. They kind of were where
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  Speaker 1: we were maybe in two thousand and eight. If you
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  Speaker 1: look at overall construction, if you look at the household,
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  Speaker 1: household growth and the birth rate, you know, we should
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  Speaker 1: have about a million four starts. That's kind of the mean,
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  Speaker 1: that's the historic mean. Right now we're a million, one
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  Speaker 1: million two if you look at the commercial repair and remodel.
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  Speaker 1: So we think, you know, the next few years. You know,
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  Speaker 1: we're cautiously optimistic. Um. You know what's great about the
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  Speaker 1: United States? People are still having babies, population growth, Uh,
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  Speaker 1: interest rates come up a little bit, they're at historic clows.
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  Speaker 1: Doesn't matter. I mean, we really don't. We are not
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  Speaker 1: as interest rate sensitive as a lot of people may think.
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  Speaker 1: And you've got the bubbles under control. We got the
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  Speaker 1: bubbles and they're stronger and faster than ever. All Right,
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  Speaker 1: Jim mc if you're gonna have to come back, I'd
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  Speaker 1: love to thank you. Harley, Wait, thank you. Jim mcalf
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  Speaker 1: as chairman, president, and CEO of us G Corporation based
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  Speaker 1: in Chicago. However, today he's in New York City, where
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  Speaker 1: we're broadcasting live from the first ever Bloomberg Breakaway Summit.
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  Speaker 1: I'm Kathleen Hayes along with Pim Fox, and this is
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  Speaker 1: taking Stock on Bloomberg Radio.